DealLawyers.com Blog

March 13, 2023

Do the Antitrust Agencies Win by Losing?

The FTC & DOJ have been taking an aggressive approach to antitrust enforcement, which has meant a number of high-profile challenges to deals. That approach has met with mixed success. The antitrust agencies have had at least one big win, but they’ve also struggled in many cases to persuade courts to accept some of their more novel theories. However, this Harvard Business Review article suggests that it’s not necessarily about wins and losses – and that the antitrust agencies’ enforcement actions may have a deterrent effect even in defeat:

The government doesn’t necessarily need to win cases for lawsuits to have an impact. For starters, big cases against big companies send a message designed to discourage future dealmaking. This is particularly true for today’s most successful technology companies, which have long expanded into emerging markets by gobbling up promising startups already on the field. As ex-Biden competition advisor Tim Wu recently noted, it can make a huge difference to an industry if the major players know they’re “under heavy surveillance from the government.”

Even if deals eventually close, regulators see value in everyone understanding that all transactions will be more closely scrutinized. From the outset, companies will find themselves encouraged to make voluntary concessions. In the Activision deal, for example, Microsoft preemptively offered substantial limits on how it will treat Activision’s products post-merger. Flagship titles including Call of Duty, notably, will not be pulled from other platforms, and offered instead as Xbox exclusives.

The article points out that, regardless of its success, an aggressive litigation strategy can be extremely effective in creating disruptions for companies that are deemed to be too powerful. Major antitrust cases can take years to resolve, and while they’re pending, members of senior management may face significant distractions due to the time they need to spend dealing with their lawyers instead of their business.

– Meredith Ervine